GM & Chrysler Reorganization Opportunity

Now that they are at the brink of collpse, GM and Chrysler have an opportunity to restructure their businseeses to be successful in the 21st century.

For the past 30 years American “Big 3” automakers have seen their market share drop from 75% to 45% or an average annual loss of 1% per year. Loss of market share and today’s crisis economy have effectively put Ford, GM, and Chrysler in peril. Fortunately, Ford recognized several years ago that it had to restructure to survive and today they are the one automaker not seeking Federal assistance. Ford products coming into the market in 2009 show company vitality and provide strong quality and customer value.

GM and Chrysler have to resolve products, labor, legacy costs, and dealers. Each of these four points are major and each must be dealt with in order to permit the companies to be an economically healthy business.

Product is king. If you have product that the public wants then that is wonderful. Product today and tomorrow is not yesterday’s product. Citizens of the US and Canada need to be made aware of the consequneces of their buying decision. This is not protectionism but represents an awareness of global and north American economics. If country-to-country product and sales are on an “equal” basis then product value can be decided by the customer.

Labor is a challenge. The UAW is working to tighten the costs. For a restructuring plan to work then labor across the various manufacturers needs to be consistent.

Legacy costs are a challenge. UAW and the manufacturers set up Voluntary Employee Benefit Plan or VEBA. However, VEBA has signifcant funding and significant additional funds are pledeged by the auto makers. Future VEBA payments are on the bargaining table.

Auto Dealers are a challenge. There are too many dealers for the number of sales. Toyota has far fewer Dealers that sell a lot more vehicles per Dealership. This makes for healthy marketing. Dealers are extremely powerful because they have had decades to solidify their position. Bankruptcy appears to be the only way for the Manufacturers to quickly reduce the number of Dealerhsips. Government assistance in reducing Dealer numbers is potentially the most challenging aspect of what must be done.

The United States Government has the opportunity to reestablish viability for the North American Domestic Automakers. This is not an easy task but if there are to be a Domestic North American Automakers then a workable solution must be reached in 2009.